MI 2022 PU3 Preliminary Examination Paper 2 QP

2022 Preliminary Examination Pre-university 3 PRINCIPLES OF ACCOUNTING 9593/02 Paper 2 20 September 2022 3 hours READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this question paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper ask the invigilator for a continuation booklet. Section A Answer all questions. Section B Answer all questions. Start each answer on a new page. You may use a calculator. All calculations must be shown adjacent to the answer. The number of marks is given in brackets [ ] at the end of each question or part question. ___________________________________________________________________________ This document consists of 6 printed pages and 1 blank page. [Turn over

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3 Section A Answer all questions in this section 1 Valore (Pte) Limited manufactures a component used in the production of mobile devices. Currently, it can produce a maximum of 10 000 units. They provided the following budgeted information. Per unit $ Selling price 40 Direct material 11 Direct labour 5 Total of semi-variable and fixed cost $ Factory costs for 5 000 units 35 000 Factory costs for 10 000 units 55 000 Fixed overheads 80 000 REQUIRED a Explain, with examples, what is meant by ‘fixed cost’ and ‘variable cost’. [4] b Calculate the break-even point in units for the company. [6] c Calculate how many units need to be produced and sold to earn a profit of $50 000. [2] d Discuss the limitations of using break-even analysis to make decisions. [4] Valore is currently operating at 70% capacity and has received an order for 2 000 units of the mobile phone component at a selling price of $25 per unit. REQUIRED e Should Valore accept the order? Why or why not? [4] [Total: 20]

4 [Turn over 2 Snuggy Limited has been in operation for many years. It makes a popular type of chair called Snoozy. The monthly budget for Snoozy is as follows. Sales are 6 000 units with a selling price of $26 per unit. Each unit requires 2.4 kilos of raw material costing $3 per kilo. Each unit requires 1.5 hours of direct labour time costing $7 an hour. Each unit requires $2 of variable overhead. Early in 2022 a new supplier entered the market, selling the required raw material at $1.80 per kilo. In April, Snuggy Limited bought all its raw material from this new supplier. Each unit of Snoozy required 2.6 kilos. Labour took 40% longer than usual to produce each unit. Average wage rate rose to $7.80 an hour. Variable overheads increased by 10% per unit. Snuggy Limited managed to produce and sell 5 000 units. The selling price rose by $0.50 per unit. REQUIRED a State two advantages and two disadvantages of preparing budgets. [4] b Prepare a flexibl